Tax Blog

Is Your Non-compete Non-enforceable

When a new employee is hired, they will learn best business practices from their employer. Employers invest time and money from their businesses into training employees. Many employers fear that employees will take those new skills and branch out on their own, creating competition for the same employers that trained them. Non-compete contracts are designed to reduce this risk. They set restrictions on a former employee’s ability to engage in the same business practices as their employer, limiting them by geographical, time, and other stipulations. These contracts can be a great benefit to employers, allowing them to fully train their employees to perform their best without fearing that those trade secrets will soon be used to create direct competition for their business.

While non-competes can provide security to an employer, they also have the potential to restrict economic freedom. For example, if a mechanic cannot work in a certain city, the people living in that city are also denied his services. Because these agreements limit the ability to freely engage in the economy, many state courts have stringent limitations on them. Courts often require employers to show a business necessity for these agreements and will scrutinize them for unreasonable restrictions. Limitations on certain jobs, such as doctors or attorneys, are more heavily scrutinized by courts than others. Non-competes can be very useful, but employers should be careful in how they are written, using the least restrictive terms to protect their businesses and ensure their non-competes will be enforceable in court. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regards to creating an enforceable non-compete contract. Please contact us at (618) 997-3436 for more information.



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